At a news conference at the International Monetary Fund and World Bank annual meetings in Bali, Obstfeld said Pakistan is facing financing gaps as it has been hit by a large fiscal and current account deficit, a low level of reserves and a currency he described as "too rigid" and over-valued. Threats include a further inflaming of the trade war between the United States and countries including China, and a sharper-than-expected rise in interest rates, which would accelerate capital flight from emerging markets.
U.S. stimulus also adds to the "already-unsustainable" debt and deficit that will undercut future growth, the report warns.
The downgrade was due to the impact of financial market stress and monetary tightening in some economies, as well as the damage from the tit-for-tat tariff actions between the USA and China, the IMF said.
"Nigeria's growth is projected to increase from 0.8 per cent in 2017 to 1.9 per cent in 2018 and 2.3 per cent in 2019 (0.4 percentage point higher than in the April 2018), buoyed by the impact of recovering oil production and prices", he said.
The eurozone's 2018 growth forecast was cut to 2.0 per cent from 2.2 per cent previously, with Germany particularly hard hit by a drop in manufacturing orders and trade volumes.
"Looking ahead, renewed impetus to reform labour and land markets, along with further improvements to the business climate, are also crucial", it said. "But there is no denying that the susceptibility to large global shocks has risen".
Growth forecasts for emerging markets were given a more severe haircut by the Washington-based lender.
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Some energy-rich emerging market countries have fared better due to higher oil prices, with Saudi Arabia and Russian Federation seeing forecast upgrades. The IMF projections don't take into account Mr Trump's threat to expand the tariffs to effectively all of the more than US$500 billion in goods the United States bought from China previous year.
Also, the International Monetary Fund admits that though oil producing countries like Nigeria are going to benefit from higher prices, it sees signs of lower investment in manufacturing, coupled with weaker trade growth.
"Where we are now is we've gotten some bad news".
In September 2018 Donald Trump imposed tariffs worth $200 billion on Chinese goods and threatened to sign off on a further $267 billion - an escalation in a tariff war that, at that point, had only seen both countries levy tit-for-tat duties on each other's imports.
Washington has also imposed tariffs on steel and aluminium, citing national security concerns, and has also warned it could impose a 25% levy on imported cars and vehicle parts.
In September, Trump imposed tariffs on almost $200 billion of Chinese imports, with China responding with higher tariffs on about $60 billion of US imports.